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NN: Why should someone buy a new car instead of a used car?
FM: Buying a new car instead of a used car is mainly a personal decision. You get the exact car you want and do not have to settle for anything less. You get a more comprehensive warranty, a cheaper extended warranty, the backing of the manufacturer, more attractive financing rates, and better incentives offered compared to a used car. Finally, you get the aesthetic value of having a brand new car.
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NN: What personal factors should be taken into consideration when buying a new car?
FM: Factors you should consider include how the vehicle will be used, financial benefits of buying a new car, and the overall cost of ownership, not just the sticker price. Also consider the emotional aspect of buying a new car. Make sure you get exactly what you want, and do not settle for anything different unless it benefits you financially and does not materially affect your needs.
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NN: What are the advantages of financing a new car over leasing a new car?
FM: Financing a car instead of leasing a car not only gives you full ownership of the car, but also more flexibility in regard to modifying the car, mileage you put on the car, and the ability to sell or trade in your car at any time you want. Financing is also a great value provided you finance with a low rate.
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NN: Should I be skeptical of 0% financing offers from dealerships?
FM: If you are creditworthy enough to be receiving a 0% financing offer, the offer is usually legitimate. However, this does not mean that the 0% offer is the best bargain cost-wise. For example, the chart* below shows how it’s possible to save more money by taking a manufacturer or dealer rebate and obtaining a low financing rate as compared to taking 0% financing from a dealer and obtaining no rebate.
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0% Financing/No Rebate |
Rebate/MCU Financing |
| Purchase Price of Car |
$25,000 |
$25,000 |
| Manufacturer/Dealer Rebate |
$0 |
$3,000 |
| Amount Financed |
$25,000 |
$22,000 |
| Loan Term |
60 months |
60 months |
| Interest Rate |
0% APR |
3.49% APR |
| Monthly Payments |
$417 |
$400 |
| TOTAL SAVINGS |
$0 |
$1,000 |
*Taxes and motor vehicle charges not included. Manufacturer/dealer rebates are given at time of purchase by the manufacturer or dealer and vary widely based on make, model and year of the vehicle and current market conditions. MCU financing rate shown is a recent APR offered to our most creditworthy members. The above chart is for illustration purposes only.
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NN: Where can someone go to finance the purchase of a new car once they decide which car to buy?
FM: The best thing to do is get pre-approval from the credit union or bank of your choice. Pre-approval prevents dealerships from adding on costs for their own profit, and determines a set cost for you. This puts you in control of the sale. When looking for pre-approvals, shop for low rates. (Hint when rate shopping: MCU is known for its great low rates on new car loans!)
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NN: Are there any tax incentives to purchasing a new car?
FM: If you purchase or finance a hybrid or electric car, federal tax incentives may apply to your purchase. To find out more, visit www.irs.gov or speak to your tax advisor.
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NN: What are some helpful tips for new car buyers?
| FM: |
- Make sure to remove yourself from the purchase emotionally and be practical
- Check the Better Business Bureau (BBB), other sites for reputable, high rated dealers
- Shop at multiple dealers to look for best price on car you are actually buying
- Shop using multiple touch points (face to face, internet, etc.)
- When at the dealership, be sure to test drive the car
- Find a dealer that has your best interests in mind, not theirs
- If you have a trade-in, know the NADA/CHROME evaluation value of the car before you go to the dealer to negotiate (See the MCU Auto website for car pricing guides)
- Be aware of Lemon Laws, get copies of Lemon Laws from BBB website
- Do not be a pure “payment shopper”, you may get less value in the long run
- Negotiate overall price of the car, not monthly payments
- Make sure all the prices you agreed to are accurately reflected on your contract before signing.
- Always get offers/promises in writing and signed by dealer
- Don’t purchase add-ons that you can buy elsewhere for cheaper
- Be aware of unusually low prices
- Don’t fall prey to finance managers who try to convince you to buy things you don’t need
- Inspect vehicle thoroughly before signing
- Double check all paperwork for hidden fees
- Get copies of everything you sign
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NN: Any other last words of advice for potential new car buyers?
FM: Be sure to do extensive research before you buy a new car. There are a million cars out there, take your time to find exactly the car you like, and don’t feel pressured into buying a car you do not feel perfectly fits your needs and wants. It’s your purchase, your car, and your money, make sure to buy exactly what you want, and don’t settle for anything you do not want.
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NN: Thank you for your time, Frank!
FM: Anytime, and good luck to all you used car buyers out there!
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